Business flowing into inner city

Seeking a labor pool and new markets, companies locate in once-neglected areas.

In blighted urban neighborhoods across the United States, progress stands out like neon on a dark street. Stores are moving in. Manufacturers are setting up shop. Business is rediscovering the inner city.

Some come because the suburbs have run out of workers. Others are eager to tap a retail market the size of Mexico. In the process, companies are breaking down old stereotypes about urban America.

After decades of neglect, the commercial influx is offering the urban poor their best opportunity yet to ride the nation's economic boom.

"It's a very real phenomenon," says David Abromowitz, a partner at Goulston & Storrs, a Boston-based law firm specializing in urban development.

Companies are beginning to sniff opportunity in the unlikeliest of places. Ten years after closing its last store in Detroit, the Kroger Co. is returning with a large supermarket on the city's northeast side. West Philadelphia now boasts a Thriftway Supermarket, its first new grocery store in two decades. Here in St. Louis, Schnuck Markets has opened a 62,000 square-foot facility in a neighborhood that hasn't had a new grocery store built from the ground up since World War II.

Supermarkets aren't the only new businesses moving in. Banks, drug stores, even malls have discovered the potential retail bonanza. Downtown Indianapolis now boasts Circle Centre, a mixed-use development on a site that sat vacant 10 years earlier.

New York's Harlem neighborhood has a new $65 million entertainment and retail complex called HarlemUSA. Next year, Wal-Mart will open a store in inner-city Los Angeles.

Such moves mark dramatic change. "For years the private sector red-lined the inner city," says Terrance Williams, associate dean for graduate studies at Catholic University in Washington D.C., and former urban designer for New York City. "They were dealing with gray areas that had populations of various incomes and they just ignored them."

Retailers are returning to poor neighborhoods because, unlike the suburbs, they're not saturated with stores. For example, a Pepperdine University study found that residents of poor South Los Angeles had one-third the grocery stores and fewer than two-thirds the banks that other similar-size communities in southern California have. By offering those shoppers more choice and better prices, retailers can quickly build profitable businesses.

And the potential is huge. America's inner-city neighborhoods represent an estimated $85 billion market for retail goods, according to a study by The Boston Consulting Group and the nonprofit Initiative for a Competitive Inner City. That's 7 percent of all US retail sales and slightly larger than Mexico's entire retail market.

Manufacturing and service companies are also moving in. Some aim to take advantage of the central location of the urban core. For example, Integrity Distribution in Buffalo, N.Y., can deliver office supplies and furniture to its city customers the next morning, hours before its suburban-based competitors.

Many companies come to the inner city to tap its labor pool. The unemployment rate in greater Kansas City, Mo., hovers around 2.5 percent. So three years ago, Sprint Corp. opened a call center in Kansas City's old jazz district, a rundown neighborhood where unemployment stood at about 14 percent.

"The easiest thing to do is to take the jobs where the people are," says Hazel Barkley, operations manager of the urban site.

The firm was flooded with 700 applications for 60 positions. Since then, the staff has not only kept service on par with the suburban site, it has proved far more stable: Turnover stands at 23 percent below the suburban rate.

Sprint isn't alone. Three miles to the south, adjacent to one of Kansas City's most welfare-dependent neighborhoods, H&R Block has set up its own call center. "Urban core labor can be competitive," says Clyde McQueen, president of the Full Employment Council, a nonprofit workforce development group.

He expects more such moves as word gets out and inner-city neighborhoods overcome stereotypes of being crime-riddled places full of unmotivated, unskilled workers. "I still think people have these ideas that locating in the urban core, you have to give up something," Mr. McQueen adds. "In fact, you gain something."

Such new job opportunities could revitalize run-down neighborhoods if the trend takes hold in corporate America.

"The longer we can maintain tight labor markets, the more you'll see improvements in the inner city," says Stuart Greenbaum, dean of Washington University's Olin School of Business in St. Louis. But if the economy declines, he warns, the inner city's gains could vanish. "Unfortunately, the poor, the less educated, are the last to be hired, the first to be fired."

Even if the economy continues to roll along, inner-city development could fall victim to its own success. For example, Boston's Grove Hall retail market represents the first new retail project in inner-city Roxbury in decades.

"That project ... is clearly geared toward retailers serving an existing low- and moderate-income community, not some gentrified new community going to move in," says Mr. Abromowitz of Goulston & Storrs. But as more development money pours in, property values could increase and push out the very people the project was intended to help. "That's a major core debate," he says. "Who's ultimately going to be served if we put dollars into these communities?"

But such problems lie in the future for most inner-city neighborhoods, which are just beginning to see flashes of revival.

(c) Copyright 2000. The Christian Science Publishing Society

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